AMD's biggest challenge to date? Cutting its 18 global datacenters down to just two

Summary:It's no secret that one of the world's best-known chipmakers is financially struggling. But AMD's plan to cut 18 global datacenters down to just two facilities represents the company's biggest challenge in its recent history. Here's why.

"It doesn't sound like the most exciting of terms," AMD's chief information officer Jake Dominguez told me in the entrance lobby of its soon-to-be one of two global datacenters, a few miles northeast of Atlanta.

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It's not particularly sexy, but it does signal an important and necessary move for AMD. In recent years, the Sunnyvale, CA.-based chipmaker has suffered financially at the hands of stagnation and rivalry — partly due to Intel's anti-competitive moves as ruled by European antitrust officials, but also due to AMD's own failure to innovate and expand to emerging technologies such as mobile.

Dominguez, along with corporate vice president of global infrastructure and operations Andy Bynum — who started just eight months ago in July 2013 — are plowing ahead with a datacenter consolidation project that will see AMD's North American operations — in Texas, California, and Canada — merge into a single facility along Georgia's tech corridor.

And it's all in an effort to reinvent AMD's own internal IT strategy to cut down costs by as much as $8.5 million in annual savings in 2013 alone, while making the company more nimble and responsive, and increasing efficiencies.

'Save yourself before helping others'

AMD's financials were for a time anything but rosy. And even today, the company remains in choppy waters.

Credit agency Standard & Poor cut AMD's rating in January 2013 after the agency cited the company's "vulnerable" business risk, following numerous fiscal quarters of decline. Later that year, AMD returned to profitability during the third-quarter and secured $500 million of credit to stave off further decline. The company was wounded, but it was healing.

The company's bread and butter, the PC market, was largely offset by its graphics and visual solutions segment, which creates chips and technologies, and reaps royalties from sales of the world's most popular games consoles — the Xbox One and the PlayStation 4.

AMD CIO Jake Dominguez: "There was a lot of speculation within the company on whether we could pull it off."

The $8.5 million savings from its datacenter consolidation could not have come at a better time.

When Dominguez became AMD's CIO in 2012, it was clear the company's workflow was borderline kaput. Processes were slow, jobs would take forever to complete, and that was hampering the company's product launch timelines. Something had to change. In order to infuse life back into the company he had joined only a year before, Dominguez realized the fix lay within the company.

Talking about AMD's chief executive Rory Read, a former CIO himself, Dominguez had to give him a "pretty tough story about the state of IT," when he first took on the top IT job at AMD.

"It was a little unnerving, because you have to sit down and give out the facts, and where we're heading and the problems we're having. And there was an instantaneous transition for him, saying, 'OK, got it, how do we move forward and fix it?' and moving that plan forward where he understands what we're trying to do, the fundamentals that require fixing."

AMD picked its two locations carefully, taking into account multiple factors. For its Atlanta datacenter, the state government offered tax breaks to the company, and the power costs were significantly cheaper. But with a heavy customer base in Asia, the chipmaker wanted to retain presence in the region, and decided to keep and bulk out its second datacenter, a few miles south of Kuala Lumpur, Malaysia.

The consolidation has helped reduce AMD's IT costs by 30 percent across the board. (Image: ZDNet/CBS Interactive)

"We were spread out over multiple datacenters across the globe, and we decided to pick the datacenters we wanted to build out," Dominguez said. And that means there was a large play to take stock of its real-estate portfolio.

Bynum said the datacenter could also become, secondarily, a customer showcase for its efforts: "We're running our entire enterprise on AMD, and show them what we can do with our products."

"Why would I go with AMD when I could go with one of its competitors? Well, we run our entire enterprise on AMD. Here's how you can run a high-performance computing grid and the cloud with AMD, and here's how you can do it and be successful doing it."

"In its purest form, this datacenter consolidation is for AMD," Dominguez said. He explained that as the PC business began to wind down, AMD wanted to "accelerate the pivot where we're trying to diminish the reliance on the PC portfolio," he said.

The secondary factor was to look ahead and future proof against what would be on deck for the coming years. The sooner the company invested in consolidating its vast number of global datacenter operations down to just two facilities, the faster it could get back up on its feet after a rocky few years. And that would have a positive impact on its current and future customers, with speedier releases and a cut-down product roadmap.

Invest now, speed up and save later

AMD's Suwanee-based datacenter packs a powerful punch — with 153,000 sq. ft. of space, the innocuous looking building combines the power of 18 global datacenters into just one of two buildings, the other located in Cyberjaya, Malaysia. And it's by no means an easy feat.

In practical terms, AMD was able to replace four racks of 4-year-old equipment with one single state-of-the-art and up-to-date server rack, which the company says reduces maintenance and facility infrastructure costs. Taking that knowledge of compressing technology, AMD shrunk 289 racks in its Austin datacenter to just 160 racks in Suwanee. That also cut power requirements by more than half, while reducing the environmental impact of its operations at the same time.

AMD's datacenters will be consolidated into one Atlanta, GA facility, and another in Kuala Lumpur by 2015. (Image: ZDNet/CBS Interactive)

Bynum explained the company was moving towards a truly virtualized environment. "That means better responses, better flexibility, and that means we can meet demands right now," he said.

Dominguez and Bynum said the company was able to condense its global datacenter operations by decommissioning 76 percent of its physical servers, and 72 percent of its virtual servers. AMD now virtualizes more than 90 percent of its corporate datacenter needs.

And AMD did this with its own knowledge, its own staff, and its own resources — all internally — without relying on spending additional costs on hiring outside consultants to tell them what they probably already knew anyway.

Before, IT costs were through the roof, and on a financial level the company had to adjust. From an IT perspective, Dominguez admitted the company had its priorities wrong.

"Historically, the easiest thing was to write a check," Dominguez explained. "Now we're saying that shouldn't be the first response. Let's sit down, have an educated discussion about what the demand looks like, and how we can facilitate that. In some cases, it might require investment. But that was the de facto position that IT had, and we're changing that dramatically in how we source infrastructure."

"There was a lot of speculation within the company on whether we could pull it off," Dominguez admitted, talking about the datacenter consolidation project. "But we still managed to deliver it two months early and on-budget."

"It was an amazing feeling to watch the company grow before your eyes, and gain the confidence that we could do this job."

Was it worth it? Only time will tell. Practice and theory are two separate things. But Dominguez remained confident. "In the last year-and-a-half, thanks to the consolidation and the application retirements, we've reduced IT costs across the board by 30 percent," he added.

By 2016, the consolidation process should be complete. The company aims to be more agile and flexible, able to react far quicker to changing conditions. There's little point in constantly playing catch-up with your competitors. Being able to condense and consolidate an entire IT infrastructure will help get the ball rolling on future technologies and developments, the executives said. And by the end of 2014, the housecleaning will be behind the company and it can focus on its strategic elements, they said.

Disclosure: Zack Whittaker travelled as a guest of AMD. No agreements or non-disclosures were signed.